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USD/INR: Slips from fresh three-week high near 71.50, eyes on coronavirus risk

  • USD/INR fails to hold on to recovery gains.
  • Indian government actively looks for measures to prove the global forecast of weak growth and downbeat revenues.
  • China’s outbreak of coronavirus heavies the market’s risk-tone, the US-EU and the US-UK trade tussle offer additional challenges.

USD/INR declines to 71.25, after rising to the three-week-top of 71.51, ahead of the European session on Friday. While the broad US dollar strength favors the pair’s broad recovery since the middle of the month, the recent pullback could have taken clues from the domestic measures that the Indian government plans to introduce.

The US dollar strength could be attributed to the risk-off moves that have recently gained momentum based on China’s outbreak of coronavirus. The lethal humanly transmitted virus has crossed national boundaries to Sydney and Japan whereas its death toll rose beyond 25 so far.

Also contributing to the risk aversion is the latest trade tussle between the US and the EU as well as the US and the UK. US President Donald Trump used the World Economic Forum (WEF) stage to signal upcoming trade wars with the Eurozone and Britain. Though, the UK might avoid the same based on the good terms between the US-UK leaders.

With this, the US 10-year treasury yields struggle around 1.745% whereas Asian stocks mark mixed results with India’s BSE SENSEX flashing 0.23% gains to 41.485 by the press time.

At the domestic front, the Indian government is ready to increase the Foreign Portfolio Investment (FPI) and also supports the domestic companies’ listing to foreign exchanges in order to avoid a higher fiscal deficit, as widely expected. The global giants like Moody’s and International Monetary Fund (IMF) have earlier cut down the nation’s growth forecasts.

Given the lack of Indian catalysts on the economic calendar, markets will keep eyes on the December month activity numbers for the US. This doesn’t dim the charm of the risk headlines emanating from China and the US.

Technical Analysis

An ascending trend line since January 14, at 71.15, followed by 71.00 round-figure can question sellers ahead of 200-day SMA, at 71.66 now. Alternatively, 71.75 and 72.00 could lure buyers.

 

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